In supply chain management, the Kraljic matrix (or Kraljic model) is a method used to classify the purchase and suppliers into four classes, based on the intricacy of the supply chain and the capacity of the purchasers and providers.
1. Non-critical Items
These are low-risk and low-impact components.
These are components that have a moderate impact on the company and are found in abundance in low-risk markets (e.g., papers, printers).
For such items, the goal should be to procure them from reliable and efficient suppliers while minimizing the administrative burden.
2. Leverage Items
These are low-risk and high-impact components.
These are components that have a high impact on the company and are found in abundance. Suppliers can easily be replaced.
For such items, companies use their bargaining power to procure them at a favourable price and terms.
3. Bottleneck Items
These are high-risk and low-impact components.
These are components are risky, but the profitability impact on the company is low.
For the short term, companies need to keep adequate inventory. For the medium to large term, companies need to maintain relationships with suppliers to ensure uninterrupted supply.
4. Strategic Items
These are high-risk and high-impact components.
The suppliers of these components have a very high impact on the company. For these items, the goal should be to develop a long-term relationship with the supplier. The company should also reconsider their make/buy decision to make these components in-house.